The state’s economic development corporation has refused to reveal how it plans to pay for the proposed renovation of Penn Station, advocates charged Thursday.
Empire State Development argued that sharing details about financing would “impair” future negotiations with Vornado Realty Trust, the developer that stands to make big money from the project.
“Release of the financial tool would impair ESD’s negotiating position,” it wrote in a Feb. 18 letter to government watchdog Reinvent Albany.
The group is concerned that the calculations include massive subsidies for Vornado, fears compounded by ESD’s refusal to make public the projected revenues from taxes on the 10 new proposed towers near the transit hub.
Accounting firm Ernst & Young developed the $600,000 “financial tool,” used to calculated the estimated revenues, the letter said. It was funded half by the state and half by Vornado — though state officials insist the developer has not seen the calculations.
“The document that was withheld under the imminent contract exception is a financial tool developed by a subcontractor of Ernst & Young that is being used to calculate projected financing revenues and provides the basis for negotiations with Vornado, with whom a contract has not been finalized,” the letter said.
Reinvent Albany’s Rachael Fauss said the letter amounted to ESD “admitting that it is secretly negotiating with Vornado the terms of what could be a massive tax break for them.”
“They say that there’s an ‘imminent contract negotiation,’” Fauss said. “They are admitting that they are secretly negotiating the PILOT terms with Vornado, and they specifically say ‘Vornado’ in the letter.”
A spokesman for ESD said negotiations are still ongoing — but with the city.
“There haven’t been any financial negotiations with any owners, since the City agreement needs to be in place first,” said the spokesman, Matthew Gorton.
Releasing the financial model “would reveal valuations that could weaken ESD’s hand in securing the best value for the public in its future negotiations with Vornado,” Gorton said.
“That approach is not unusual or unconventional in projects of this size and scale,” he said.
State senators will hold a hearing on Friday where they plan to ask questions about the financing of the Penn Station project, which Gov. Kathy Hochul inherited from her predecessor, Andrew Cuomo.
While Hochul cut the size of the project’s 10 proposed skyscrapers down by by 1.4 million square feet, she still plans seize and raze blocks-worth of property for Vornado to replace with commercial skyscrapers.
A government tariff known as “payments in lieu of taxes,” or PILOTs, will be assessed and used to fund renovations at Penn. The state has not said how much the renovations cost.
ESD has said the PILOTs will be similar to those used for the development of Hudson Yards by Related Companies — which amounted to a $1.4 billion property tax discount.
Vornado CEO Steven Roth donated $69,700 to Hochul’s re-election campaign in December, according to campaign finance records, and was also a major donor to Cuomo, who gave several speeches promoting the Penn project.
ReThinkPennStationNYC, a group opposing the development, on Thursday issued 20 questions they think ESD should answer at the hearing — including how it calculated the amount of money needed for the renovation and whether ESD has started negotiations with Vornado.
“The public and policymakers should know the terms of this agreement before its finalized,” Fauss said. “The public still has no idea how much money the development will raise for Penn Station renovations.”
A rep for Vornado, which already owns much of the neighborhood, said the company has not spoken to state officials about PILOTs
“Vornado is focused on continuing to be a key partner in this neighborhood and committed to a GPP that’s transformative for the region and reflects the vision outlined by Governor Hochul and Mayor Adams last week,” the spokesman said in a statement.
“Vornado has a strong record working on successful public-private partnerships that opened Moynihan Train Hall, completed a new station entrance at 33rd Street, and will deliver a new LIRR concourse.”